Broken media equals funding doldrums

About three years ago I attended a financial conference where a big VC stated, categorically, that the reason they were not investing in semiconductor or EDA startups was because there was a lack of informational coverage to validate research.  In other words, because media coverage of the industries had significantly degraded, they couldn't afford to pull the trigger on investment.


This same VC firm has invested heavily in Web 2.0 and green technology over the past three years and you can see why.  There is lots of coverage on those areas.  There is pretty much nothing but coverage on those areas.  The only coverage on semi and EDA is negative.

You might say that that is the media's fault because, after all, the semiconductor coverage is all about the economics of the industry, not the technology so it's naturally going to be bad.  But I would like to point out that the the green Web 2.0 industries has yet to turn a profit, yet the media continues to go bonkers over the technology.  What's the big difference?  Which industries invest more in getting their story out?

I know, I'm a broken record.  But this time I have a case study.

I've been working with a start-up in the semi arena for a few months now helping them craft their message and get a communications program going for them as soon as they get funding.  I've also been introducing them to VCs to get that funding.  We had a lead investor all ready to go.  They got great feedback from current customers.  Dataquest and IC Insights show real growth potential for this particular technology over the next 18 months and beyond  ... but the rest of the players in the market haven't put out anything innovative in five years and they look like they are cutting back even further.  There is no media outreach in the sector so, as a result, the only buzz is negative.  Even with all the numbers lining up for success, negative buzz made the VCs back off.  They still want to invest, but they don't want to take the lead.

There are many similar stories out there.  Investors are lined up and ready to invest in technology outside of Web 2.0 and green, but not as a lead investors.  All because of a a lack of media.

What about all the bloggers covering the semi sector?  Well, here's the thing: the VCs haven't yet come over to the blogosphere, even when they invest in it.  That's going to take some education still.  And education requires some investment in media.  Funny how that works, isn't it?

Comments

  1. jbasquesApril 22, 2009 at 3:56 AM

    Interesting post Lou, but I think the challenges go even further than the fact that "VCs haven't yet come over to the blogosphere." Currently, most of the Semi and EDA blogs are too singularly technology focused. They don't look at a big overall picture or what's coming down the road in 3-5 years. That's what the VCs really care about. If that challenge isn't address then there's nothing for them to read whenever they do get to the blogosphere. The value of a company must be expressed in what it can do for the industry as a whole.

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  2. www.google.com/accounts/o8/id?id=AItOawlzmGLyB9EQswpBVae-YdWLNOid15PY7pUApril 23, 2009 at 12:19 AM

    Hi Lou,
    It's a layered problem and the media is not really to blame. The industry as a whole has an issue. The "media" only covers the technology of the space - that's a problem when VC's are interested in making money. But it's to be expected because the media sees no "news" in the business of the EDA industry. It's also not surprising because the industry insiders focus only on the technology - there's little to no discussion about the business. And here's the problem - the industry is driven by top line macro-economics because the business model ties it so closely too it. ie. Regardless of how much value an EDA tool delivers the ROI has a fixed ceiling due to the business model. What is worse, due to globalization, the cost model for EDA is going up and sales cycles are (probably) getting longer (I don't have any data on this that is decoupled from the effects of the recession). So, for VCs to get interested in this space again there needs to be fundamental changes in the business model and the channel (http://xuropa.com addresses this piece).
    The vast majority of the press about web 2.0 and green is about the business. There's nothing new about solar panels and windmills - it's all incremental improvements in technology. The buzz is about the business potential.
    A stark comparison - Apple's recent results (the most expensive PDA out there) and Altium cutting prices to "come in line with FPGA vendor's freeware". That's broken.
    - James Colgan

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